MVNOs seek growth opportunities to offset roaming impact

Wednesday 24 May 2017 | 15:08 CET | Background

Hosted by Knet365, this year's World MVNO Congress in Nice attracted over 800 participants, making it the biggest event in 16 years. Participants came from over 60 countries to listen to more than 125 speakers from leading MVNOs such as Virgin Mobile, Lycamobile, FreedomPop and Tuenti as well as wholesale providers such as Deutsch Telekom, Orange, Telefonica and Vodafone.

MVNO growth strategies

The congress started off looking at the forecast for the MVNO market value to exceed USD 85 billion in 2022, presented in a recent report from Global Market Insights. According to the report, rising penetration of mobile network subscribers across the globe is anticipated to drive the MVNO market growth over the forecast period. Considerable spending by mobile network operators to advance their telecom infrastructure is likely to have a positive impact on the MVNO market size. Mobile network operators (MNOs) are supporting MVNOS in order to increase their industry revenue, gain more consumers and expand into niche industry segments.
A panel consisting of the CEOs of Lycamobile, FreedomPop and Virgin Mobile outlined how growth varies depending on the region. According to Virgin Mobile, there is enough opportunity in the Middle East, while Lycamobile sees a need to focus on countries where regulation is supportive and there is a population of at least 10-15 million. Lycamobile, which is already active in 22 countries, said regions such as Asia and Africa lack the necessary legislation. Also China is quite difficult to enter, so the company expects growth to be limited there unless some changes occur. FreedomPop is looking more at countries where credit cards are common, as this is their main payment option for top-ups. FreedomPop also called China a difficult market to enter and sees Europe, Japan, Australia and Taiwan as more accessible.

An interesting question was raised whether the companies would enter the IoT space, and they all provided a similar answer, that they would stick with their consumer business. The CEO of Lycamobile said that first the case for earning a profit from IoT needs to be proven.

FreedomPop highlighted an alternative growth model, of licensing its platform. It’s entered new markets via licensing deals (see link). Operators also discussed new wholesale models, such as Mexico’s 4G shared network (Red Compartida), which recently met its initial coverage goal of 30 percent of the country’s population. Under the terms of the public-private partnership, mobile operators but also MVNOs will be able to rent space on the 4G network, offering low-cost access to high quality spectrum in the 700 MHz band.

EU roaming to have negative impact

Another pressing issue for the sector is adapting MNO and MVNO strategies for the new EU roaming rules taking effect in mid-June. The general consensus was that the mandatory ‘roam-like-home’ pricing will have a negative impact, and even the possible opt-out will prove a difficult accounting task for many operators to show they are suffering financially. MVNO Voo in Belgium is one of the first to receive authorisation for adding surcharges in some cases, while the regulator in the Netherlands, which counts some 60 MVNOs, said it had received no such applications.

According to the CEO of Lycamobile and other MVNO representatives at the congress, MVNOs feel they have been ‘hung out to dry’, with no support from regulators and not enough time to adapt to the roaming changes. MVNOs do not operate under the same structure or with the same agreements as MNOs and hence carry a greater risk. Particularly if for example customers travel to countries where there is a high cost associated and there is no revenue coming-in from roaming traffic. It is also difficult to predict how much more customers are going to use roaming after the changes, especially without any fair use policy in place. Lycamobile said it is still investigating how to comply with the new rules and is looking into all options.

At the MVNO congress operators discussed options for MVNOs to ‘get creative’ and offer alternative tariffs and options such as WiFi offloading. Federico Homberg, head of Mobile Wholesale Business Development at Deutsche Telekom, noted that MNOs can play with outbound and inbound countries and re-balance their revenues, but this is far more difficult for MVNOs, particularly those with limited reach or only available in some countries. Depending on the outcome and usage DT might be forced to increase the cost of normal services if they are not able to rebalance this internally.

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